September 2013

1. September 2013 HEALTH SAVINGS ACCOUNTS OUR PLAN AND ITS BENEFITS FOR EMPLOYEES

2. INTRODUCTION One of the greatest challenges employers face today is controlling the cost of the health care coverage they provide for their employees. Many are turning to alternatives to traditional health insurance plans, called consumer-driven health plans. These are plans in which routine claims are paid using a consumer-controlled account versus a fixed health insurance benefit. Health savings accounts (HSAs) are a type of consumer-driven health plan. This presentation explains what HSAs are and how our plan operates. This is a sample presentation intended for presentation to all employees. It is designed to be presented by an individual who is knowledgeable about HSAs and the employer’s specific HSA plan. This is a sample presentation that must be customized to include and match the employer’s own policies and plans.

3. AGENDA The agenda for our meeting today is: What a health savings account (HSA) is. How our HSA plan works. Which employees are eligible to participate. How to make HSA contributions. How to receive distributions from your HSA.

4. WHAT IS AN HSA? HSA plans were created by the 2003 Medicare bill. They are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. They are a savings product that offers a different way to pay for health care. Employees must be covered by a high deductible health plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs. Money that employees save on insurance can be put into an HSA.

5. HOW DOES OUR HSA PLAN WORK? Our HSA plan allows you to pay your routine health care expenses directly from a prefunded spending account and to have a high-deductible health insurance policy to protect you from catastrophic medical expenses. If the balance on this account runs out, you pay the claim just like under a regular deductible. You may keep any unused balance, or "roll over" at the end of the year to increase future balances or to invest for future expenses. You and the employer contribute to the HSA up to the statutory limit set annually by the IRS. Contributions are allowed only for employees under the age of 65. You own and control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You also decide what types of investments to make with the money in the account to make it grow.

6. HOW DOES OUR HSA PLAN WORK? (CONT.) You enroll in our high deductible health plan (HDHP). Under IRS regulations, our HDHP has a minimum deductible of $1,250 for individuals and $2,500 for families for 2013. These amounts will be adjusted annually. You establish an HSA account with [name of bank or financial group] and make pretax payroll deductions up to $3,250 for individuals and $6,450 for families. (These are the IRS limits for 2013.) If you are over age 55 or older, you can contribute an additional $1000 for family or single coverage. You choose when and how to spend the funds in your individual account. There are investment options for accounts of $2,000 or more. Accounts of less than $2,000 can only earn interest.

7. ELIGIBILITY To be eligible to participate in our HSA plan, you must: Be enrolled in our HDHP. Not be covered by any other health plan that is not an HDHP. Be under the age of 65 (this is an IRS and not a company requirement). Not be claimed as a dependent on another person’s tax return.

8. HSA CONTRIBUTIONS You make pretax contributions each pay period. For 2013, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,250.  For family coverage, the maximum annual HSA contribution is $6,450. Catch-up contributions for individuals who are age 55 or older are increased by statute to $1,000 for 2009 and all years going forward. The organization contributes [fill in amount for your employer] each year to employees participating in the HSA. This contribution is not taxable to the employee.

9. QUESTIONS? COMMENTS?

10. HSA DISTRIBUTIONS HSA funds can pay for any “qualified medical expense,” even if the expense is not covered by your HDHP. What is a “qualified medical expense”? No definitive list of “qualified medical expenses.”  Partial list is provided in IRS Pub 502 (available at www.irs.gov). A determination of whether an expense is for “medical care” is based on all the relevant facts and circumstances. The expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often depends on the word “primarily.” No substantiation of claims required. Keep your receipts in case you need to defend your expenditures or decisions during an audit. If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% penalty.

11. HSA DISTRIBUTIONS (CONT.) Funds may be used for medical expenses of your spouse or any of your dependents, even if these individuals are not covered by the HDHP. The account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain until used. There is no “use it or lose it” as with a flexible spending account, where funds have to be forfeited at year-end if not used. There is no time limit on using the funds. HSA funds may be used to reimburse prior years’ expenses as long as they were incurred on or after the date the HSA was established and they were not paid for or reimbursed by another source or taken as an itemized deduction.

12. HSA DISTRIBUTIONS (CONT.) You can continue to use your account tax-free for out-of-pocket health expenses.  When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, co-pays and co-insurance under any part of Medicare. You cannot use your account to purchase a Medicare supplemental insurance policy. Once you turn age 65, you can use your account to pay for items other than medical expenses. The amount used for other expenses will be taxable as income, but will not be subject to any penalties. 

13. QUESTIONS? COMMENTS?

14. SUMMARY A health savings account is an alternative to a traditional health insurance plan. HSA plans help individuals save for future qualified medical and retiree health expenses on a tax-free basis. To participate in our plan, you must enroll in our high deductible health plan (HDHP), must not be covered by any other health plan that is not an HDHP, must be under the age of 65, and must not be claimed as a dependent on another person’s tax return. In 2013, you may make pretax contributions up to $3,250 for individual coverage and up to $6,450 for family coverage. The employer contribution for 2013 is [fill in amount for your company].

15. SUMMARY (CONT.) HSA funds can pay for any “qualified medical expense,” even if the expense is not covered by your HDHP. You need not substantiate your claims, but we advise you to keep receipts for your expenses in the event you are audited. Funds may be used for medical expenses of your spouse or any of your dependents, even if these individuals are not covered by the HDHP. The funds in your account roll over automatically each year and remain until used. There is no time limit on using the funds.

16. SUMMARY (CONT.) You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, co-pays and co-insurance under any part of Medicare.  Check with Human Resources if you have any questions or need more information. You can also find information on the IRS website athttp://www.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx.

17. COURSE EVALUATION Please be sure to complete and leave the evaluation sheet you received with your handouts. Thank you for your attention and interest!